Royalty Interest

Oil and Gas Leasing Help
#1

We were approached to sign a ratification of royalty reservation and oil, gas and mineral lease (which calls for 25% royalty).... due to both parties of the original deed passing away and the royalty interest was divided between the heirs.....

wording on deed -

There is hereby EXCEPTED AND RESERVED from this conveyance in foavor of the GRANTOR an undivided one-half(1/2) of the Grantor's present and existing royalty interest in and to all of the oil, gas, lignite, uranium, coal and other minerals in, on and under the above described property. (This is in LaSalle County, Texas)

ratification

is to reserve a proportionate percentage of lessor's royalty interest, as provided in any properly executed oil, gas and minteral lease, or other instrument covering the reserved mineral rights, which cover all, or part of the land, proportionate to one-half (1/2) times the percentage of (deed owners), mineral interest owned in and under the land at the time the deed was executed.

The undersigned parties do hereby ratify and confirm the lease, including but not limited to the pooling provision contained therein.

Questions:

1. "on" was left out - (in, on and under) ........does this make a difference

2. because we have royalty interest only - do we really HAVE to sign. No money is paid to us up front. They are calling about twice a week to get us to sign. The Oil and Gas Lease has already been signed and executed without our ratification - so am just wondering why they still need our signature...

I may have more questions later Or are there questions I should be asking?

Thank you for any information you can give me.

#2

Dear Ms Hefner,

In my opinion…

  1. Nope. What we are taking about is “bright line” language by adding the “on” and it does not in and of itself change the four corners of the document.

  2. Nope. You do not have to sign. But I will tell you why you are being hounded to execute the ratification. It is not to confirm your royalty interest. It is to allow your royalty interest to be diluted by the pooling provision of the lease that you are ratifying. If the bottom hole or horizontal drainhole is on the lands where your royalty interest is located and you do not allow pooling, you receive an undliluted1/2 of the landowners royalty. Having said that, you have to make a decision as to whether you want your royalty percentage diluted. There are many cases where oil wells have NOT been drilled because of situations where the royalty owner did not want to dilute their royalty, which the net effect was that the burdens were so high that exploration was not profitable. However, if your lands are not the drillsite, then you would not get any revenue unless you ratified the lease or the pooling document.

I think that you need to get a professional involved so that all relevant information can be obtained and you can get some good advice. I would not recommend a do-it-yourself approach in this case.

#3

Thank you - they are going for gas and I do know they plan on horizontal drilling. It is only 1280 acres… and as far as I know it will be just on that acreage. But I will check into that. thank you so much for your response.

Buddy Cotten said:

Dear Ms Hefner,

In my opinion…

1. Nope. What we are taking about is “bright line” language by adding the “on” and it does not in and of itself change the four corners of the document.

2. Nope. You do not have to sign. But I will tell you why you are being hounded to execute the ratification. It is not to confirm your royalty interest. It is to allow your royalty interest to be diluted by the pooling provision of the lease that you are ratifying. If the bottom hole or horizontal drainhole is on the lands where your royalty interest is located and you do not allow pooling, you receive an undliluted1/2 of the landowners royalty. Having said that, you have to make a decision as to whether you want your royalty percentage diluted. There are many cases where oil wells have NOT been drilled because of situations where the royalty owner did not want to dilute their royalty, which the net effect was that the burdens were so high that exploration was not profitable. However, if your lands are not the drillsite, then you would not get any revenue unless you ratified the lease or the pooling document.

I think that you need to get a professional involved so that all relevant information can be obtained and you can get some good advice. I would not recommend a do-it-yourself approach in this case.

Best,

Buddy Cotten
www.cottenoilproperties.com
#4